In a second quarter where there were few leases above 20,000 square feet, Santa Clara Valley Medical Center bucked trends and took over 200,000 square feet of medical office space in San Jose..
SCVH leased 230,500 square feet at 1410 South Bascom Hill from owners PMB in San Diego and Chicago-based Harrison Street, according to the latest market report by CBRE. The two investors paid $26 million for the building last year.
The property is on seven acres located within Bascom Station, which is a residential and office development at the corner of South Bascom Avenue and Southwest Expressway. It was sold by Bay West Development, which developed Bascom Station and paid $37 million for the parcel in 2018.
PMB focuses on healthcare facilities, including 1100 Van Ness in San Francisco, a 250,000-square-foot medical facility it developed in partnership with Sutter Health. Harrison Street also focuses on healthcare real estate, as well as life science. The Chicago-based firm recently offloaded eight Bay Area medical offices with tenants such as Sutter and Kaiser Permanente for $215 million.
While the big SCVH lease offered a positive accents for the second quarter, the Silicon Valley office market continued to experience stagnation and downward momentum overall during the second quarter. The availability rate rose from 17 percent to 20 percent in Q1 2023, according to the CBRE report. The highest availability was reported in Downtown San Jose, which stood at 37 percent.
“Many large tech tenants continued to offload their underutilized space,” the report said. “Employee layoffs and preserving shareholder value remained amongst the top priorities for large, publicly traded companies.”
The largest dumping of space came from Google, who put more than 1.4 million square feet of office space on the market for sublease. There have also been significant office dumps by Meta and Roku, outstripped demand by a wide margin.
“Big companies are dumping space on the market with almost no takers,” Craig Petersen from Kidder Mathews, said.
Companies are not only offloading space, but also stopping major construction projects that could reshape Silicon Valley. Google has halted its Downtown West project in San Jose. The development near Diridon Station was to include 4,000 homes, 7.3 million square feet of offices, 500,000 square feet of shops and restaurants, a community center and 15 acres of parks.
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